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HAL Id: halshs-00726127 https://halshs.archives-ouvertes.fr/halshs-00726127 Submitted on 29 Aug 2012 HAL is a multi-disciplinary open access archive for the deposit and dissemination of sci- entific research documents, whether they are pub- lished or not. The documents may come from teaching and research institutions in France or abroad, or from public or private research centers. L’archive ouverte pluridisciplinaire HAL, est destinée au dépôt et à la diffusion de documents scientifiques de niveau recherche, publiés ou non, émanant des établissements d’enseignement et de recherche français ou étrangers, des laboratoires publics ou privés. Sustainable Tourism and the emergence of new Environmental Norms Malgorzata Ogonowska, Dominique Torre To cite this version: Malgorzata Ogonowska, Dominique Torre. Sustainable Tourism and the emergence of new Envi- ronmental Norms. 29èmes Journées de Microéconomie Appliquée (JMA), Jun 2012, Brest, France. halshs-00726127

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Page 1: Sustainable Tourism and the emergence of new Environmental ... · Keywords: Economics of Tourism, tourism products’ distribution, sustainable tourism, branding policies, environmental

HAL Id: halshs-00726127https://halshs.archives-ouvertes.fr/halshs-00726127

Submitted on 29 Aug 2012

HAL is a multi-disciplinary open accessarchive for the deposit and dissemination of sci-entific research documents, whether they are pub-lished or not. The documents may come fromteaching and research institutions in France orabroad, or from public or private research centers.

L’archive ouverte pluridisciplinaire HAL, estdestinée au dépôt et à la diffusion de documentsscientifiques de niveau recherche, publiés ou non,émanant des établissements d’enseignement et derecherche français ou étrangers, des laboratoirespublics ou privés.

Sustainable Tourism and the emergence of newEnvironmental Norms

Malgorzata Ogonowska, Dominique Torre

To cite this version:Malgorzata Ogonowska, Dominique Torre. Sustainable Tourism and the emergence of new Envi-ronmental Norms. 29èmes Journées de Microéconomie Appliquée (JMA), Jun 2012, Brest, France.�halshs-00726127�

Page 2: Sustainable Tourism and the emergence of new Environmental ... · Keywords: Economics of Tourism, tourism products’ distribution, sustainable tourism, branding policies, environmental

Sustainable Tourism and the emergence of newEnvironmental Norms ∗

Malgorzata OGONOWSKA† Dominique TORRE†

June 4, 2012

Abstract

Since 1990s environmental protection and awareness became major issues.Consumers are more and more aware of environmental issues and consciousof existing pollution caused by mass tourism. Consequently a new segment ofdemand desiring sustainable tourism products have appeared, enhancing ser-vice providers to offer this type of products. This paper analyzes the evolutionof service provider’s offer adapting to demand preferences modification. Usinga theoretical framework, it explains how environmental quality standards canbecome general norms in tourism industry. By analyzing a case of monopolyand duopoly, it considers different possible frameworks and strategic choicesthat may be implemented by the incumbent. Though, it explains the role ofindustry in the emergence of the new environmental norms.

JEL Classification: L83, Q56

Keywords: Economics of Tourism, tourism products’ distribution, sustainabletourism, branding policies, environmental norms.

1 Introduction

Tourism includes a wide range of economic activities that have an important im-pact on the environment and the local populations of the destinations. Environ-mental protection and awareness became the major issues in the 1990s when theconcept of sustainable development has been introduced in Our Common Future bythe Brundtland Commission (World Commission on Environment and Development[1987]). Thus, tourists are more and more aware of environmental issues; conse-quently the new segment of demand, desiring environmentally responsible products,

∗Authors gratefully acknowledge Claudio Piga and Ulrike Gretzel for the comments on thepreliminary versions of the paper which was presented at the ENTER 2011 Conference in Innsbruck,Austria, and at the Workshop on The Economics and Management of Leisure, Travel and Tourismin Rimini, Italy. We thank all the participants of these two conferences for their precious comments.†University of Nice Sophia-Antipolis - GREDEG - CNRS, 250 rue Albert Einstein, 06560 Val-

bonne, France. E-mail: [email protected], [email protected]

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has appeared. These new concerns modify tourist’s perceptions of destinations, ofaccommodation brands and of intermediaries distributing tourism products (tour op-erators, on-line and off-line tourism agencies etc.). The supply of tourism productshas to adapt to these moving norms. A new concept of sustainable tourism has beendeveloped and became an important issue in tourism related literature. Accordingto Associazione Italiana Turismo Responsabile (quoted by Cracolici, Cuffaro, Ni-jkamp), sustainable tourism is defined as “every tourism activity that preserves fora long time the local natural, cultural and social resources, contributing to the well-being of individuals living in those tourist areas”.

Meanwhile, two segments of demand co-exist: consumers who are environmen-tally aware and search for sustainable tourism products, and those, who are moreinterested in other characteristics of the offered services (e.g. prices, luxury stan-dards etc.). This paper tries to describe the evolution of the offer of a companyadapting to modification of consumer preferences. In order to consider those ques-tions, this paper is organized as follows. Section 2 presents the contributions ofthe literature on sustainable tourism and on strategies of pricing and distribution oftourism products. This literature review indicates the positioning of this paper - onthe crossing of those two specific types of issues. Then, in section 3, the model andits main results, including branding and marketing issues, are presented. In section4 quality enhancement question is considered. Finally, in section 5 the point ismade on potential competitors’ entry on the market and thus, on industry role inenvironmental norms’ diffusion, before concluding in section 6.

2 Literature review

Literature related to sustainable tourism questions is quite various and thus is inter-ested in diverse economic aspects of those issues. In consequence it can be classifiedin several categories. First identified category is found on Bramwell’s and Lane’sdefinition of sustainable tourism [1993], that is “an economic development modelconceived to improve the quality of life for the local community, and to facilitatefor the visitor a high-quality experience of the environment, which both the hostcommunity as the visitors depends”. In this point of view sustainable tourism oughtto first of all assure the relationship between the local community and the tourists;in consequence the local governments and administrations should develop appro-priate policies (for more information on this issue see Accinelli, Brida and Carrera[2008], Caserta and Russo [2002]). Those policies should also focus on environmentprotection by enhancing market actors to implement the measures and amenitiesecologically responsible. This point was emphasized by Rivera [2002], Shen andZheng [2010] and Weaver [2005]. In order to smooth the progress of the envi-ronmental policies implementation, there is a need to educate the market actors(hotel management, tourism agents, tour operators, administration), as well as, thewhole population with the objective to adapt people’s perceptions into this newlong term vision (Nita and Agheorghiesei [2010]). The implementation and adap-tation of amenities and equipment more respective of environment can be impelledby demand’s desires, which compose the second identified category of the literature.

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The environmentally aware tourist’s segment may influence the service providersto invest in their facilities modernization to make them more ecological (Accinelli,Brida, Carrera and Pereyra [2007], Brau [2008], Claude and Zaccour [2009], Minciu,Popescu, Padurean, Hornoiu and Baltaretu [2010]). In order to get the return on hisinvestment, service provider may increase the prices of products including “green”amenities in comparison to traditional (more “polluting”) products. Finally, pricediscrimination practices are also observed in natural reserves tickets pricing. In-deed local visitors (verified in the 3rd world countries) pay lower fees then the othertourists (for more extensive analysis on this issue see Becker [2009], Walpole, Good-win and Kari [2001]).

None of the existing papers of sustainable tourism literature is concerned by thequestions of ecological products pricing (besides the issue of natural reserves ticketspricing) and the strategies of their distribution. For that reason this paper combinesthe contributions of the articles on sustainable tourism with those developed inthe literature on tourism products distribution and price discrimination strategies(Clemons, Hann and Hitt [2002], Gallego and van Ryzin [1994], Fay [2008], Fay[2008], Feng and Xiao [2000], Fleishmann, Hall and Pyke [2004], Fleishmann, Halland Pyke [2004], Shapiro and Shi [2008], Stokey[1979], Zhao and Zheng [2000]).

3 The emergence of environmental norms

This paper describes the evolution a service supplier’s offer adapting its range oftourism products to consumers’ preferences changes. These preferences are particu-larly influenced by progressive awareness of a number of consumers of environmen-tal risks generated by tourism. If/when this sub-population becomes sufficientlylarge and active, a demand-pull movement generates changes in supply of tourismproducts. These changes are oriented to diversification of products offered by thetraditional brands, who develop rather basic quality sustainable tourism products.

3.1 The benchmark case

Initial state corresponds to lack of any information on the pollution driven by masstourism. In this case, tourists are not concerned with environmental issues and areinterested in acquiring traditional/standard tourism products. The service providerproducing tourism goods and services offers only this category of products. Ac-cordingly, if n potential tourists have the same propensity to pay related to level ofparameter α; α > 0 in their utility function measures in monetary terms the sat-isfaction that they draw from the consumption of traditional tourism product. Allpotential tourists purchase or not the standard tourism product, according to theprice of this good. If pT figures the price of this product, the net utility of potentialtourists is given by equation (1):

uT = α− pT + β (1)

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where β is an index of quality of the product.

Potential tourists choose to purchase the standard product if uT ≥ 0 and toreserve in the opposite case.

The service provider, who produces without costs in a situation of monopoly,determines the price maximizing its profit. This price extracts the total consumerssurplus and is given by p∗T = α + β. Then, profit depends only on the numberof potential tourists and is given by π∗T = n(α + β). All potential tourists finallypurchase the traditional product and pay the reservation price.

3.2 The rise of environmental issues

This second stage captures the service provider’s and potential tourists’ decisionsrelated to the rise of environmental issues. Available public information on pollutioncaused by standard tourism products progressively generates a movement of distrusttowards traditional products and split the consumers in two subpopulations. Newsegment of environmentally conscious tourists m0 (0 < m0 < n) appears. Theutility that they draw from the consumption of traditional products decreases, asthese products are now perceived as generating pollution and is now given by (2):

uGT = α′ − pT + β (2)

with α′ < α. For the remaining (n −m0) potential tourists, utility of consuming atraditional product is still given by (1).

Since the service provider cannot apply a first degree price discrimination, hehas to choose between charging the previous price pT1 = p∗T = α + β but then only(n − m0) tourists buy the product and the profit is πT1 = (n − m0)(α + β), or alower price pT2 = α′ + β and the profit is then πT2 = n(α′ + β). In both cases, thenew profit is smaller than π∗T = n(α + β).

The service provider can then adapt to changing preferences and offer also asustainable product, generating few or no environmental damages. The quality ofthis product is rather low (ex: hiking packages/services) and given by γ < β. Theutility that environmentally conscious consumers m0 draw from the consumption ofthis sustainable tourism product (labeled g1 ) is given by (3):

uGg1 = α′′ − pg1 + γ (3)

where the parameter α′′ ≥ α represents the propensity to pay for the sustainableproduct of environmentally conscious tourists. If the quality of the g1 sustainableproduct incurs no additional costs, the service provider is now able to differentiatehis offer if γ ≥ (α′ − α′′ + β). In this case, the service provider continues to chargethe reservation price p∗T for the standard product, which is consumed by the n−m0

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traditional tourists, and charges the price p∗g1 = α′′ + γ for the sustainable productwhich is consumed by environmentally conscious population. Now, service provider’sprofit is π∗T/g1 = m0(α

′′ + γ) + (n−m0)(α+ β) and it can be smaller or larger thanthe initial π∗T according to the respective values of α′′, β and γ. Whatever the valuesof parameters are, π∗T/g1 is larger than service provider’s profit when he serves allconsumers by offering traditional product only.

3.3 The dynamics of environmental conscious tourists pop-ulation

The population’s sensibility to environmental issues depends on exogenous and en-dogenous factors. Scientific information on nature and causes of environmentaldamages constitutes an exogenous origin of emergence and/or growth of the envi-ronmentally conscious population. Awareness of environmental issues changes alsorapidly in all countries around the world, according diverse circumstances as natu-ral disasters, national and international information campaigns, education, politicalinterventions. . . These events can be assimilated to exogenous shocks defining ini-tial conditions of dynamics or modifying unexpectedly its path. After a given shockgenerated by one of these events, stylized facts show that two dynamics are possible.If the shock is too small or “negative”, population considering ecological issues asimportant rapidly decreases to zero. Such situation has been observed for instancein some European countries few years after the Chernobyl disaster in the 1980s orseveral years after the first communications on greenhouse effect during the 1990s. Ifthe initial shock’s amplitude is sufficient, the “ecological messages/values” are moreor less rapidly spread among the population 1. The number of environmentally con-scious tourists then varies from one period to another. This variation depends mainlyand positively: on one hand on the current number of environmentally conscioustourists who spread the ecological message and promote the “sustainable tourism”;on the other hand, on the environmental damages generated by standard tourism.To capture this dynamics the following expression (4) is chosen:

mt = max

(n,min

[0, a

(mt−1 −

b

i

)(n−mt−1) +

b

i

])(4)

where i > 0 stands for the quality/intensity of the exogenous information while aand b are parameters, with 0 < a, and 0 < b� 1. It can be easily verified that thepopulation of environmentally conscious tourists has then three stationary equilibriacorresponding respectively to m∗ = 0,m† = b

iand m∗∗ = n − 1

a(see appendix 1 ).

Only m∗ and m∗∗ are stable under adaptive expectations while the second stationarysolution m† is unstable under the same expectations. We can furthermore observethe following interesting result:

Proposition 1. z(i) All things being equal, all increase in the information about environmental issuesincreases the probability of convergence toward a stationary equilibrium with a large

1Katrina hurricane or Fukushima nuclear disaster created such reactions in Europe, North-America and Japan.

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proportion of environmentally conscious tourists and a low level of environmentaldamages/pollution generated by tourism.(ii) All things being equal, a sufficiently large environmental shock tends to generatedynamics of convergence toward a stationary equilibrium with a large number ofenvironmentally conscious tourists and only few environmental damages generatedby tourism. Too small environmental shocks have only temporary effects and are notable to generate a large population of environmentally conscious tourists.

Proof: see appendix 1.

3.4 Sustainable brand and new forms of marketing

When pollution persists, environmentally conscious consumers become more sensibleto ecological issues and they refuse to buy anything from a company who distributesalso polluting products. Formally speaking, the equation (3) stops to represent theenvironmentally conscious tourists’ utility provided by sustainable products. Inthis expression, α′′ progressively falls to 0: environmentally conscious tourists thenchoose the reservation strategy, or, in other words, boycott all the service provider’sproducts. When mt is quite important, this boycott decreases drastically the profitof the firm. His reaction could be to offer quite the same sustainable tourism productbut under another brand name, while still distributing traditional product under thesame previous brand name. This double branding strategy includes additional costsc for the service provider corresponding to creation of new “ecologically responsi-ble” brand and in maintaining its quality and confidentiality of its parent companyin order to preserve its reputation. In this particular setting the environmentallyconscious tourists’ utility for the consumption of the sustainable tourism productreturns to the previous level:

uGg2 = uGg1 = α′′ − pg1 + γ (5)

but the environmentally conscious tourists population has grown to m1. Given thateach sub-population pays the corresponding reservation price , the service provider’sprofit is now π∗T/g2 = m1(α

′′ + γ) + (n−m1)(α+ β)− c and it could still be smallerthan π∗T/g1 if α′′ remains close to α.

As the proportion of environmentally conscious tourists moves during time it isnot easy for the service provider to choose a long run policy. Two movements caninterfere: (i) the dynamics of mt described by equation (4) is not always regular andcan at some stages move towards m∗∗ high equilibrium in an oscillatory way. Thequality of available information spread by researchers can also change and acceler-ate the convergence. New environmental shocks can also occur, changing sometimesthe convergence path followed by tourists’ population. Last, environmentally con-scious tourists, now informed of the financial links between the new “sustainable”brand and the traditional brand, distributing standard products, can boycott thesustainable products offered by the new brand. The service provider then needsmore definitive policy.

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4 Investing in quality

The growing number and influence of potential environmentally conscious touristsprogressively encourages the service provider to enhance the quality of sustainableproduct. This action has two consequences. First, it attracts tourists initially notinterested in sustainable tourism products. Second, it erases the service provider’sbad reputation associated to him offering under different brands traditional andsustainable products. Environmental norms progressively are then imposed to thewhole population of potential tourists. The traditional products then disappearsfrom the monopolist’s offer.

The sustainable tourism products that have been considered until now are lowquality products in which traditional tourists are not interested. After the failure ofthe new “sustainable” brand, the service provider has two technological and com-mercial possibilities. The first is to stop offering standard products. In this case,his bad reputation disappears for the environmentally conscious tourists who thendraw from sustainable products the utility given by (3). Hence, the service providersaves the cost c (as there is no more product differentiation necessary) while theutility for these products is given by (6) for the traditional tourists:

uTg3 = α− pg3 + γ (6)

As the service provider cannot price discriminate his clients, he will set the pricep∗g3 = α + γ, lower than p∗g2 = p∗g1 = α′′ + γ but acceptable to all potential tourists.The profit is then π∗T/g3 = n(α + γ), smaller than π∗T but probably greater than

(n−m1)(α+ β)− c which the service provider would get if only traditional touristshave been served in the case of boycott.

Another possibility is to enhance the quality of the sustainable tourism product.This improvement involves specific and costly investments. For example, the hotelshould be heated with renewable energy, gather rain water, engage in an environmentprotection policies. . . . All these improvements incur additional costs c′, with c� c′2.The advantage of this solution is that the whole population are provided with thesame high quality product. If this quality is appreciated at the level γ′ by all tourists,the utility of tourists’ population not interested in environmental issues is now givenby (7) and the utility of environmentally conscious tourists is expressed by (8):

uTg4 = α− pg4 + γ′ (7)

uGg4 = α′′ − pg4 + γ′ (8)

2In order to simplify the comparison, this cost is limited to fixed annual cost. The introductionof variable costs does not however modify fundamentally the results.

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The service provider then charges the reservation price of ”‘traditional”’ touristsand the profit becomes π∗T/g4 = n(α+ γ′)− c′ which has to be compared with π∗T/g3in order to decide if the investment in quality is the good solution. In such case, theenvironmental standards finally become general norms. The comparison providesthe condition (14):

γ′ ≥ γ +c′

n(9)

It is amazing to observe that the radical decrease in the environmental damagesgenerated by tourism appears as a consequence of a modification in supply, drivenby modification a group of consumers preferences: even traditional tourists - indif-ferent to ecological values - then consume sustainable products.

5 New competitors and the industry role in envi-

ronmental norms’ diffusion

In the previous sections, we have supposed that the service provider is in a positionof monopoly. A first extension would be to consider many incumbents competingin both segments of traditional and environmentally sustainable tourism products.The point would then be to delineate the relative relevance of the equilibriums of theindustry with and without specialization. A less classic extension would relate to theincidence of the adoption of environmental norms on the competitive structure of theindustry. We tackle this issue in a first subsection by considering the consequence ofthe new choices of the incumbent on the strategies of potential entrants. We finallyconsider in the following subsection the possible role of the industry in the diffusionand promotion of the norms.

5.1 Reputation and new competitors’ entry

When environmental norms make the product homogeneous after the sustainableproduct quality’s improvement, price increase associated to this quality improvementopens the possibility for a potential entrant to make a new offer on the traditionalmarket. Given that this entrant could limit its offer to the traditional product,its costs being smaller than incumbent’s costs before the quality improvement ofthe sustainable tourism product. In this new situation, the traditional product isoffered by the entrant to tourists not interested in environmental issues. The utilityof tourists interested in traditional product is now given by expression (10):

uTe = α− pe + β (10)

where pe figures the price of the traditional product offered by the entrant. Thisprice is determined by the entrant given the possible reactions of the incumbent.The last chooses among three strategies:

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1. coexistence strategy: in this case, the incumbent accepts to specialize in sus-tainable product. Its price can be enhanced at the level of the environmen-tally conscious population’s reservation price. The price pg5 of the sustainableproduct then extracts the whole consumer’s surplus of this population and theincumbent’s profit is given by (11):

πg5 = m1(α′′ + γ′)− c′ (11)

2. elimination strategy: in this case, the incumbent finds profitable to compete inprice with the entrant. He decreases his price from its initial level pg4 to attract“traditional” tourists interested in the traditional product offered by the en-trant. The entrant has to decrease his price. The elimination price correspondsto incumbent’s price of the high quality sustainable tourism product and mak-ing the entrant’s profit entrant equal to zero. This elimination price pg6 solvesthe equation α− pg6 +γ′ = α− pe +β, where n−m1(α− pe +β)− ce = 0, i.e.,pe = α + β − c

n−m1. Finally, pg6 = γ′ − β + ce

(n−m1). Then, incumbent’s profits

when implementing the elimination strategy, is given by expression (12):

πg6 = n

(γ′ − β +

cen−m1

)− c′ (12)

3. back to the low quality sustainable tourism product: in this case, the incum-bent decides to reduce the quality of the sustainable product to its previouslevel. The price is then pg3 = α + γ and the profit is given by (13):

πg3 = n(α + γ) (13)

At this stage, relations between the incumbent and the entrant can be consideredas a game in which the incumbent is the leader as he has the possibility to chooseamong the three possible strategies while the entrant can only answer either byoffering traditional product at price pe = α + β in cases 1 and 3, or by renouncingto offer traditional product in case 2. The figures illustrate some of the possibleoutcomes of the game, according to the values of different relevant parameters.

According to figures 1 the strategy chosen by the incumbent depends, first ofall, on proportion of potential tourists interested in sustainable tourism products mover the overall population of potential tourists, then on the level of costs c′ and ceand finally, on the quality of the sustainable tourism product. Depending on thelevels of those parameters, each strategy might be the best choice for the incumbent.Indeed, on the one hand, if the number of tourists interested in sustainable productsis low compared to the whole potential tourists population, the best solution wouldbe the third strategy i.e. the service provider should choose to offer a low qualitysustainable product. On the other hand, if the proportion of tourists interested insustainable tourism products is relatively high among the overall potential touristspopulation, the incumbent will offer a high quality sustainable product. If thisnumber is extremely high, as well as the quality of the product he offers, and thetraditional product’s quality, offered by a potential competitor is rather high and so

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10 20 30 40 500

500

1000

1500

6 7 8 9 10

850

900

950

1000

1050

1100

m1

Pg3

Pg5

Pg6

Pg3

Pg5

Pg6

g1

Figure 1: Comparison of incumbent’s profits while implementing coexistence,elimination and no quality enhancement strategies

are the costs he incurs, the incumbent chooses the second strategy i.e. to eliminatethe entrant by practicing elimination price. Finally, the first strategy of coexistencewith the entrant is chosen, if the proportion of tourists interested in sustainabletourism products is relatively high among the overall population, but not extremelyhigh, as well as the quality of the sustainable tourism product.

A comparison of the profits given by (11), (12) and (13) provides also the fol-lowing results:

Proposition 2. z(i) All things being equal, the “back to the low quality” tends to be the incumbent’sequilibrium choice when the population of environmentally conscious tourists is low.When it increases, the coexistence strategy with a high quality sustainable productis chosen. When the population of environmentally conscious tourists is very large,the elimination strategy dominates.(ii) All things being equal, all increase in quality of the sustainable tourism producttends to make irrelevant the “back to the low quality” choice and to promote firstthe coexistence case, then the elimination strategy.

Proof: see appendix 2.This result shows that the competitive consequences of emergence of environmen-

tal norms are not fully predictable. Some tendencies however emerge while popu-lation of environmentally conscious tourists and the sustainable product’s qualityincreases: the specialization of different suppliers in different segments is the morelikely to appear when the population of tourists not interested in environmentalissues is still consequent. The entrant’s elimination, however, occurs when the pro-portion of the ”‘traditional”’ tourists declines and makes entry costs too important.Still, it should be noted that as the costs of entry are essentially fixed costs, elim-ination should not occur when the quality of sustainable products increase slowlyand the ”‘traditional”’ tourists population decreases slowly. In this case, the fixedcosts would be already amortized when the elimination attempt is initiated by theincumbent, and given the reservation price of the entrant being then close to zero,

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the elimination attempt fails.

5.2 Consolidating the environmentally conscious tourist’scommunity

The proportion of environmentally conscious tourists depends on exogenous factors(public news, ecological shocks, extreme meteorological events. . . ). Public scientificinformations also has an impact on population’s interest in environmental issuesand norms. The proportion of environmentally conscious tourists then evolves dur-ing time according to endogenous network effects. Until now, it was considered thatthese movements create new constraints for the tourism industry suppliers who reactpassively to the norms and mentalities’ evolution. The previous section, however,shows that the changes of environmental norms can generate two different conse-quences in competitive environment of a given service supplier. When the touristspopulation is divided in two sub-populations of quite the same importance, thesituation is more critical for the incumbent who is frequently under pressure of acompetitor, who can take a part of its market shares. In this case, the supplier canadd its own private contribution to the public information on the ecological damagescaused by traditional tourism products.

In situation when changes generated by environmental norms have possible im-pact, it could spread additional information on environmental damages. This infor-mation, labeled j, to distinguish it from the scientific information i, has an impor-tant consequence - it provides a pure exogenous signal that could increase tourist’ssensibility to environmental issues. Equation (4) then becomes (14):

mt = max

(n,min

[0, a

(mt−1 −

b

i

)(n−mt−1) +

b

i+ j

])(14)

The consequence of this additional incumbent’s contribution to available infor-mation is then to change the out of equilibrium network dynamics, without movingthe stationary equilibrium of the populations (see Appendix 3).

6 Concluding remarks and further research

The paper analyses evolution of service provider’s offer, in the situation of monopoly,adapting to demand preferences’ modification. As consumers become progressivelymore and more aware of environmental damages caused by massive tourism, be-cause of public information on pollution becoming available, a sub-population ofenvironmentally conscious tourists, desiring sustainable tourism products, appears.Progressive growth of this subpopulation, driven by information’s spread, leads theservice provider to diversify his offer by developing sustainable tourism product. Asenvironmentally conscious tourists become even more sensible to ecological issuesand boycott the products distributed by service provider, who offers as well tradi-tional products, service provider develops new specific brand in order to distributesustainable tourism product. This double branding strategy, implying additional

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cost in order to preserve its good reputation, enables the service provider to pricediscriminate his clients. However this situation, beneficial for the service provider,may last only for the short period of time, as the supplier cannot indelibly concealfinancial links existing between the two brands. In order to avoid another boycottmovement the service provider adopts a “all-sustainable” strategy - he distributessustainable product only. In order to satisfy the whole population, as there are stillsome tourists more interested in luxury standards than in ecological issues, he en-hances the quality of the distributed product, that incurs an additional cost relatedto specific investments. In this situation, ecological standards become general norms.

The main danger resulting from the “all-sustainable” strategy is then that en-vironmentally conscious population imposes environmental norms to the rest of thepopulation. This situation attracts a new entrant who for instance distributes stan-dard/traditional products only, at a very advantageous price such as traditionaltourists (not interested in environmental issues) could choose the cheaper traditionalproduct. Then, the strategy chosen by the incumbent depends on the proportionof environmentally conscious tourists among the whole tourists population, on thesustainable tourism product’s quality level and on both suppliers costs’ levels. Mainresults of this paper are that, if the number of environmentally conscious touristsis low, the service provider/incumbent chooses to lower the sustainable product’squality to its previous level in order to lower the price of this product and thus,to serve out all the consumers and maintain all its market shares. Otherwise, ifthe proportion of environmentally conscious tourists is relatively high, the serviceprovider chooses a co-existence strategy with the new entrant and supplies only thissubpopulation and lets his competitor offer traditional product on the traditionalmarket. The third strategy - potential competitor’s elimination - is implementedwhen the environmentally conscious population is extremely high and the quality ofthe sustainable product offered is also very high. In such situation, the incumbentmay lower its price to the level that makes the potential entrant’s profits equal tozero. This strategy is quite complicated to implement as it requires very specificconditions. In most cases the strategy of co-existence dominates, what will in thenear future confirmed by an empirical study.

References

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Appendix 1: Proof of Proposition 1

(i) Figure 2 presents two cases of environmentally conscious tourists’ populationdynamics. The left-side of the figure presents slow dynamics with a tendency of thepopulation to grow moderately when the proportion of environmentally conscious

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tourists is small and the damages are important while it decreases also moderatelywhen the population of green tourists is large and the level of damages - small.The equilibriums m∗ and m∗∗ are then stable. The right-side corresponds to rapiddynamics of the population with a strong sensibility to the level of environmentaldamages and to the number of already environmentally conscious tourists. In thiscase also the two equilibriums m∗ and m∗∗ are stable.

 

mt-1 ** 1/m n a  /b i  

mt

n

n

mt

n

n mt-1

The size of the networks grows slowly The size of the network grows rapidly and this growth is reversible

/b i   ** 1/m n a  m*= 0 m* = 0

Figure 2: Dynamics of the environmentally conscious tourists’ population

(ii) Small positive shocks in case of small proportion of environmentally con-scious tourists generate a short term increase of this population, with a tendencyto decrease to m∗. When the initial shock or one of the subsequent positive shocksis sufficient to bypass m†, then the dynamics joins more or less rapidly the secondstable equilibrium m∗∗.

Appendix 2: Proof of Proposition 2

A comparison of expressions (11) and (13) shows that the coexistence strategy ispossible when m1(α

′′ + γ′)− n(α+ γ) ≥ c′, which, given that γ′ > γ becomes moreprobable when m1 increases. The profit of elimination given by (12) tends to infinitywhen m1 is close to n, which makes it - for such values of m1 - greater than theother profits. From these two observations, the part (i) of Proposition 2 is deduced.Given that only the “back to low quality” profit (13) does not depend positivelyon γ′, the “back to low quality” possibility is progressively crowded out when γ′

increases. The two other profits depend positively and linearly on γ′ but with ahigher coefficient for (12) than for (11). From these comparisons, the second partof the Proposition 2 is deduced.

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Appendix 3: Effect of the service providers on the diffusionof environmental norms

 

mt-1 ** 1/m n a  /b i  

mt

n

n

mt

n

n mt-1

The size of the networks grows slowly The size of the network grows rapidly and this growth is reversible

/b i  ** 1/m n a  m*= 0 m* = 0

/b i j  

Figure 3: Effects of service providers on the diffusion of norms

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